3. French Business Registration

If you run a lettings business in France, you may be required to register as a business with the regulatory authorities - the Chambre de Commerce .

There is no requirement to register if you let unfurnished accommodation, as the rental profits are considered as ‘professional’ income.

If you let furnished accommodation the rental income is considered to be 'commercial' income and different rules apply.

The rules are also a little opaque!

The main general implication of registering as business in France is that you may be required to pay social security contributions as a self-employed person.

However, this rule only applies to a professional landlord if three criteria are met:

• You let at least two dwellings on an habitual basis;
• The properties are the principal home of the occupants;
• You meet the minimum income criteria as stated above.

The requirement to pay the full panoply of social security contributions does not, therefore, arise automatically from registration with the Chambre, but you need to be aware that it remains a potential liability, based on whether or not you meet the criteria outlined above.

Thus, if let out a single furnished property, and the rental amounts to more than 50% of your income, you would need to register as a business, but you would not need to pay social security contributions as a self-employed person, because you do not meet the other two criteria.

In short, there are two definitions of what constitutes a ‘professional landlord’.

If you let both unfurnished and furnished accommodation, then the income from each will be considered separately.

These advantages are:

• You can set off losses against the totality of your other earnings, and there are generous rules on depreciation;
• Provided you have owned and let the property for five years, you are exempt from the payment of capital gains tax on the sale of the property;
• The property is exempt from consideration for wealth tax
;
• There are concessions on inheritance tax as the property will be assessed as business assets.

These concessions are particularly attractive if you already run a business in France and, therefore, already pay social security contributions.

It is also important to understand that, even a 'non-professional' landlord does not escape the payment of certain social charges.

In particular, your rental income will be subject to a general social welfare levy called CSG/CRDS at the rate of 11% on net income. We say more about this the section in the next section on the Taxation of Rental Profits.

Accordingly, even though you may not be registered with the authorities as a business, you will still pay some social charges on your rental profits.